Due to Factory Orders Concern British Pound and Gilts Experience Fall

The Pound has weakened against both USD and Euro as a recent report surfacing suggested that the UK manufacturers are receiving fewer orders, despite the overall improvement of the business conditions. Not only that, but, for the 5th day on a row, UK gilts have also declined. The Chancellor of Exchequer, George Osborne recently played down the importance of an AAA rating for UK and that probably have caused this downfall in British gilts, as predicted by the analysts.

Not only against Euro and USD, but Pound experienced a fall against most of the 16 major currencies around the world. It is expected that the Bank of England is all set to resume the quantitative easing process by restarting its asset purchase program. 

According to the Senior Foreign Exchange Strategist of Rabobank International, Jane Foley, there are a lot of negative factors floating all over the market for Sterling. The major UK currency is currently priced at 81.08 pence per Euro after depreciating by 0.2%. One pound currently costs $1.6172 as it lost 0.1% today. Incidentally, yesterday, Pound was valued at $1.6172 USD which marked the strongest level for the currency since 1st November.

According to a recent report released by the Confederation of British Industry, the UK factory orders are at -12 for December, better than -21 of November. However, a reading in minus still denotes that the majority of the UK manufacturers have seen declines in the order numbers.

Spencer Dale, the Chief Economist of England’s Central Bank has already stated that the inflation may prove to be sticky. Spencer added the British economy is undergoing a long and painful adjustment currently. The British budget office has also cut the economic forecasts in last week. The Budget Office predicts that the export figures will see lows as well.

The 10-year UK bond yield has risen by 4 basis points and is at 1.86% currently. The 1.75% security due in September, 2022, however experienced a fall of 3.40 Pounds and is at 99.02. According to the statistics released by British Debt Management Office, the UK Government has already sold inflation linked bonds worth 1.1 billion pounds. These bonds are going to mature in March, 2024 and are expected to attract bids which will be 2.37 times more than the amount for which they have been sold.